Sustainable Vision

Let's face it: the basic accounting reports generated by most accounting systems show where funds came in and where they went out; they show the balances on accounts; they show cash flow vs. revenue and expenses. All of these things look at what happened. This is important and essential information for determining whether something went as planned. It is also essential information for steward leaders to use to create new plans and generate projections as to what something might look like as the enterprise moves forward.

But reports that make the most sense to accountants and translate well onto tax forms and accounting systems aren't always the best reports to use to govern, develop strategy, manage, or procedurally maintain the work of an enterprise. For enterprises that have constituencies and stakeholders - and not just shareholders, owners, workers, and customers - reports must also make sense to what that audience needs.

For those in the governance and oversight roles of an enterprise - or even ownership role - traditional accounting reports tend to encourage leaders to govern by looking backwards into what was done, rather than forward into what is going to be done. Many times, these reports lead people into discussions of what should have been or what could have been, not into what can and should be done moving forward.

The traditional accounting reports are best classed as management reports. These reports help day-to-day management of funds according to budgets, purpose, and categories. Nevertheless, even still, they often do not reflect the trends that most managers need to know. Typically, managers, too, need to look ahead, rather than behind. Looking behind only serves them insofar as they are able to hold others accountable and project forward toward goals. Depending on their level of management, some managers are more strategically-oriented, while others are more tactically-oriented. Good steward leadership suggests that these differing roles may require different reports.

Finally, for those working in the financial procedural roles, many of the more technical accounting reports make the most sense to them: trial balances, vendor activity reports, and so on. The more typical accounting reports help them to see that everything is in good order before generating more strategic and analytical reports.

Design Group International's Financial Services Roles tool can help steward leaders determine which roles require which reports to best accomplish the enterprise's goals. The tool is free, and it may be downloaded by clicking the button below.

Leading change to bring about greater financial health in an enterprise will likely involve different people in different roles at different levels of the organization. Often, changes that lead to greater financial health are a complex of adaptive and technical changes - changes that require very different things from different people and groups within the enterprise. Adaptive changes require new learning and paradigm shifts in thinking. Technical changes involve new techniques and methods to change procedures, processes, programs, and products.

The more complex and adaptive the changes are, the more often that change must be led from closer to the top of the organization. Nevertheless, it is possible to lead change from any place in an organization. Any one of an enterprise's roles can lead change by working with peers, superiors and subordinates to the extent that the enterprise's structure allows. Steward leadership balances the need for change with the enterprise's capacity for that change.

Any change worth making encounters resistance. Leading change in an enterprise's financial health is no exception. The type of resistance will depend on the type of change and the steward leader's place and role in the organization. Technical changes proposed by leaders in technical roles often meet the least resistance; the more adaptive the change, the more resistance occurs above and below the steward leader who guides it. As resistance occurs, it is essential to see that as information to build toward the change, rather than assume the resisters are somehow fundamentally flawed.

As you examine your role as a steward leader in your enterprise, how might you lead change to improve your organizational outcomes - including financial health?

Design Group International's Financial Services Roles tool can help you determine what changes would best be led by which leaders in your enterprise. The tool is free and shows what types of changes typically can come from what roles in any given enterprise. Click the link below to get your tool today!

Once your enterprise has defined its financial roles, steward leadership offers a variety of choices in how to staff those roles in practice. Most organizations require some combination of staff, contractors and vendors to fill their full complement of financial roles. Only rarely (and in the largest organizations) can all roles be filled by staff within the company.

When determining what roles may (or must) be staffed, contracted, or provided through vendors, there are a number of questions steward leaders ask:

What is our enterprise's capacity? In other words, what can we handle on our own where we have the expertise, time, energy, and passion?

What roles can be combined or divided into full-time-equivalent positions?

Where does having an outside contractor add expertise, security, oversight, or other benefits that could not occur internally?

What vendors do we require for software, banking, payroll, and so on?

What roles must be staffed or otherwise provided for outside the traditional finance and accounting jobs?

Each organization's staffing setup will be different. The same enterprise may change its staffing arrangements over time based upon the needs at the time - including the specific people they hire and their skill set and capacity gaps. They don't have to be stuck with one staffing model for all time.

As a 3 January 2015 article from The Economist noted, increasingly on-demand work arrangements leave many more options for both workers and companies than previously existed. As the article notes, this is a double-edged sword for both workers and companies. Nevertheless, when determining how to staff financial roles, this increase in on-demand work provides opportunities for enterprises to find innovative ways to deliver excellence.

Design Group International's Financial Services Roles tool can help steward leaders determine which roles need to be staffed internally and which roles may need to be serviced by outside contractors. While any of the roles could be staffed internally or contracted, the types any given enterprise chooses to staff or contract will be based on that enterprise's current needs and strategy. The tool is free and available here.

One of the basic financial planning tools available to steward leaders and their organizations is a budget. Yet, in many cases, this planning tool, in the wrong hands, becomes a tool for power and control. Part of this is because of the way in which many organizations conduct their budget process. Often, this is a zero-sum game that pits departments and colleagues against one another. This is particularly true in the nonprofit and faith-based sectors, although it can be true in any corporate environment.

Good steward leadership of financial role differentiation can help reclaim the budget as a planning tool for organizational excellence, and can help to provide innovative, creative solutions to fiscal challenges. Over and over again, I have seen decision-makers at the highest organizational levels request for the wrong kinds of budgetary documents to be set before them for the wrong kinds of approval, leading to confusion, frustration, and conflict. Some executives and managers request stacks and stacks of numbers from their subordinates and from the "financial people," with no clear object in mind as to what will be approved and what will not be. Others just want a summary of the same data, but still without the clarity as to what they are really looking for. In some government-funded or subsidized institutions, if a department does not spend its entire allotment in a particular fiscal year, it receives less the next year, automatically. This leads to many leaders cramming purchases and salaries in to the last few months or weeks of the cycle to inflate their numbers so they will have more to work with the next year. This could hardly be considered strategic planning.

In many enterprises that can be considered institutions, this budget process is so painful for all involved that it leads to a second problem: no one wants to make adjustments to the existing plan until the next pre-ordained cycle. This can create two divergent results: first, there is the rigidity of binding people and projects to a budgetary plan that no longer makes sense, given actual conditions. Some of this may be due to mismanagement of the plan by a subordinate, but in many cases, it is just due to the fact that no plan is perfect, ever, and things change. The second divergent result is that of more or less ignoring the existing budget plan (or parts thereof), and just plowing on ahead, hoping the black ink balances out the red in the end of the cycle. And, depending on available assets, cash flow and dumb luck, sometimes it works out.

Financial role differentiation can help reclaim budgets as a planning tool that helps organizations implement their overall strategy and achieve their goals with excellence. Innovative budgeting presses decision-making as close to the actual work as can be reasonably attained, particularly when broad, proscriptive (as opposed to prescriptive) policies and orders have been created ahead of time. These proscriptive policies begin at the highest levels, and essentially set the process up for approval from the beginning.

While the bookkeepers and accountants will need to tie each budget line item to a specific account number, typically the strategic people will not need to see that. They will, instead, need to see that the trends are working toward the goals and where they need to adjust big-picture items to keep things moving forward. Management leaders will then spend time helping departments and projects keep financial pace. And procedural roles will have clarity where everything goes.

It helps when the whys and wherefores of the overall strategy penetrate deeply into the organizational structure. This can help people with individual budgetary needs and desires to work inside a bigger picture than their project, department, or group.

Design Group International's Financial Services Roles Tool can help differentiate these procedural, management, and strategic roles as they must interact to produce a financial plan. Once a plan (budget) is in place, they can continue to work together to make adjustments to respond to opportunities and challenges as they develop. The tool is free, and it can help show where different roles fit, and thus what kind of approach to budgets and planning they may need to take.

Essential to any financial strategy, no matter whether an enterprise is upscaling, downsizing, or trying to hold a line, is the differentiation of financial roles between strategy, management, and procedure. Most enterprises focus on the procedural: making sure there is adequate separation of roles and powers to reduce the risk of fraud or theft. While certainly an essential part of any organization's structure, this procedural role differentiation is only a small part of the whole. It is also, of course, commonplace to group procedural work by task: Accounts Receivable, Accounts Payable, General Ledger, Payroll, and so forth. This is because a certain degree of efficiency can develop from task repetition and focus, as Henry Ford demonstrated long ago. Modularizing tasks and separating powers is often a technical solution to snarled bookkeeping and accounting. So whether procedural roles sub-divide along tasks or certain powers (or, usually, both), this kind of role takes up most of the "best practices" manuals and accounting standards most enterprises focus on.

The management and strategy roles, then, tend to get less attention. Part of the reason for this is that they tend to operate outside the finance and accounting departments and non-financial-titled people often are responsible for them. Nevertheless, to maintain organizational excellence and implement creative, innovative approaches to challenges, steward leadership requires that strategy and management roles must have their due.

Strategy roles often reside in the executive-level staff and the governing board(s) and/or other accountability structures which work on behalf of the owner(s). Strategy begins with the overall financial model in which the enterprise operates. Questions of financial goals, where money generally comes from, where it gets expended, where profits go, what does long-term growth, sustainability, and viability look like - these are strategic questions. Specifically financially-titled executives support the chief executive's capacity to develop strategy within the owner(s') and governing body's parameters.

These strategic roles are supported by those in the management roles. Management roles provide the forecasting, planning, analysis, and reporting functions that support the overall enterprise. They also provide the day-to-day decision making within strategic parameters to advance toward longer-term goals. They work at the trend level, observing trends and intentionally working to create trends within their scope of responsibility. Some of these roles may have explicitly financial titles (like Financial Analyst, Office of Budget), but others may not.

One of the reasons that many enterprises end up focusing on procedure, even when they want to develop and manage strategy, is because the normal financial reports most accounting systems produce are quite procedural, and many organizations try to use the same, basic reports at all levels. In smaller enterprises, this happens easily since the roles are not very differentiated, and so people who work at a procedural level often are asked to report at the higher levels. And some executives and managers, fearing to reveal their own (perceived or real) lack of financial savvy, just go along with it.

Our free Financial Services Roles Tool groups these three types of roles - strategy, management, and procedure - from top to bottom. Using the tool, steward leaders can list out the different needs of their organization at the various levels, and define who is doing what role. It's usually best to start with the procedural roles and work up - procedural roles are easier to define, and the rest may take some thinking and working. Don't be surprised if there are gaps! Don't be surprised, either, if certain roles exist as outside contractors rather than within the organizational chart.

As I work with leaders of enterprises large and small, I observe that getting the organization's financial roles in order - from staffing to reporting - is a complex undertaking.

In Good to Great, Jim Collins argues that, after leadership, "[getting] the right people on the bus, the wrong people off the bus, and the right people in the right seats" (p. 13) is the prerequisite to any long-lasting healthy growth of any enterprise. Nowhere is this more true than with an enterprise's financial health. Clearly defining roles for financial services helps steward leaders put the right people in the right places and makes sure all the needed roles are covered. Moreover, it helps as leaders plan for how work will be structured - who reports to whom; who needs to see and act upon which reports, and when, and so on.

Unclear roles cause us to ask some significant questions about our operations:

What if we have no one acting strategically? Procedurally?

What if our procedures are overly complex? Over-simplified?

What if our planning is good, but never gets back to reality?

What do we need an outside firm to do? What do we need to keep in-house?

How do we handle needed changes? Are they adaptive or technical, or both?

What reports help which roles do their job?

Over the next few months, we will talk about these questions in a series of blog posts. Each of these questions can lead us to designing the right balance of roles, reports, and strategy to accomplish our enterprise's goals. As we exercise steward leadership of our respective enterprises, having the overall systems in place to make sure the right people are doing the right kind of work will help us increase our financial health as we work toward our goals.

We've created a tool called the Financial Services Roles tool that outlines some of the basic roles and how those roles are differentiated in organizational systems. The tool is free: also, for a limited time, leaders who download the tool receive a free financial roles consultation. Click the button below to get yours today!